T&E: ‘Higher import tariffs won’t save car industry if EU drops CO2 targets’

Last Friday, the 27 EU member states voted on the Commission’s proposal to seriously increase the import tariffs on EVs produced in China. We already commented on this last week. Meanwhile, the Chinese have reacted, and the NGO T&E has commented interestingly.

China’s Ministry of Commerce (MOFCOM) has opposed the European Union’s additional tariffs on electric vehicles (EVs) from China after the vote was passed on Friday.

“China firmly opposes the European side’s unfair, non-compliant, and unreasonable protectionist practices and resolutely opposes the European side’s imposition of anti-subsidy duties on Chinese EVs,” a MOFCOM spokesperson said.

“China’s EVs are market-driven, with full competition, and through continuous innovation, have increased the quality of the world’s supply of green public goods, making an important contribution to the global response to climate change. The European side’s protectionist practices seriously violate WTO rules and interfere with the normal international trade order,” he added.

Still negotiating?

“China firmly opposes the European side’s draft final ruling but also notes the European side’s expression of political will to continue to solve the issue through negotiations,” the MOFCOM spokesperson said, adding that “technical teams from both sides will continue negotiations.”

“China hopes that the European side will wake up to the fact that the imposition of tariffs will not solve any problems and will only shake and stunt the confidence and determination of Chinese companies to invest and cooperate in Europe,” MOFCOM concludes.

“China urges the European side to really show practical actions to implement its political will and return to the right track of resolving trade frictions through consultations. China will also take all measures to safeguard the interests of Chinese enterprises firmly.”

T&E: ‘EU CO2 emission standards are key’

The NGO Transport & Environment immediately reacted to the aforementioned EU decision. T&E warns that the heightened tariffs won’t save European EV manufacturing if the EU drops its planned CO2 targets, a move the European car manufacturing association ACEA is urgently pleading for.

Meanwhile, many involved European businesses, including some European car manufacturers, are opposed to changing the rules again and are pleading to keep the CO2 targets as planned for the coming years. Of course, T&E is joining them and coming up with a new forecast proving that these CO2 targets are of the utmost importance.

“European carmakers can regain a significant part of the EU electric vehicle market lost to China-made EVs if the bloc maintains its car CO2 targets while also levying tariffs,” according to a new forecast by Transport & Environment (T&E).

T&E finds that imports from China—including Tesla, BMW, and Volvo—are on track to account for a quarter of EVs sold in Europe this year. However, if both tariffs on China-made EVs and the EU emissions standards next year go ahead, this share could decrease to 20% in 2025 and 18% the following year.

“However, China-made EVs could expand their foothold to 27% of the European BEV market next year if the EU delays the 2025 CO2 targets and relies only on tariffs,” T&E estimates. “Some European carmakers have called on the EU to postpone or soften its standards next year. This would cause BEV sales by EU manufacturers to stagnate as they would continue to focus on more profitable combustion engines and delay the roll-out of affordable electric cars,” T&E argues.

Mixed Impact

Julia Poliscanova, senior director for vehicles & emobility supply chains at T&E, said: “Higher EV tariffs are right but only in tandem with the car CO₂ targets. They are part of a coherent industrial policy to boost European electric car production. However, the EU risks having the worst of both worlds if it delays the 2025 CO2 targets while limiting the affordable models imported from China.”

EU tariffs on EVs from China have had a mixed impact so far, according to T&E analysis of the EV-Volumes database. MG had its largest ever drop in BEV market share in Europe, falling from 4.1% share in August 2023 to 2.4% in August 2024, the research shows.

On the other hand, BYD continued to expand its EU share, though slower than before, growing from 1.6% in August 2023 to 2.9% BEV market share in the same month this year. Geely increased its market share from 1.3% in August last year to 2% in August 2024.

Battery production

“Beyond EVs, the EU also needs a more coherent approach to its homegrown battery industry,” T&E remarks. “Domestic battery producers have experienced setbacks, driven by global market dynamics and cheap Chinese batteries.”

“Unless action is taken, 59% of the battery production planned for Europe is at risk of not going ahead,” T&E estimates, and would likely be scrapped. “This would lead to a loss of billions of investment and close to 100,000 potential jobs.”

T&E called for an EU investigation into battery cells to enable trade defense measures. Julia Poliscanova concludes: “It makes no sense to jeopardize the billions of investment in EU gigafactories while keeping the lowest battery tariff in the world at just above 1%. The EU must look seriously at trade defense measures while supporting domestic production with an EU Battery Fund and policies that reward clean battery manufacturing.”